Trucking benefits as slack demand suppresses diesel prices

Diesel prices continue to offer little movement week to week-- despite a continuing rise in the price of crude oil. That's largely because domestic and international demand for diesel remains down significantly compared to gasoline.

Diesel prices continue to offer little movement week to week-- despite a continuing rise in the price of crude oil. That's largely because domestic and international demand for diesel remains down significantly compared to gasoline.

The cost for a gallon of diesel moved up one cent from last week to $2.23/gal. That price remains down more than 50% from a year ago when it sat at $4.72. A barrel of crude oil rose again this morning, touching $60.48 for June delivery. While June contracts expire today, July delivery also was up this morning at $59.48.

By comparison, gasoline rose another seven cents last week to $2.30/gal., up 23 cents from two weeks ago. Tavio Headley, staff economist at the American Trucking Assns. (ATA), told FleetOwner that the price disparity between diesel and gasoline right now is due largely to the different supply and demand factors each fuel is experiencing.

Diesel prices continue to offer little movement week to week-- despite a continuing rise in the price of crude oil. That's largely because domestic and international demand for diesel remains down significantly compared to gasoline.

The cost for a gallon of diesel moved up one cent from last week to $2.23/gal. That price remains down more than 50% from a year ago when it sat at $4.72. A barrel of crude oil rose again this morning, touching $60.48 for June delivery. While June contracts expire today, July delivery also was up this morning at $59.48.

By comparison, gasoline rose another seven cents last week to $2.30/gal., up 23 cents from two weeks ago. Tavio Headley, staff economist at the American Trucking Assns. (ATA), told FleetOwner that the price disparity between diesel and gasoline right now is due largely to the different supply and demand factors each fuel is experiencing.

"Demand for gasoline is increasing steadily as we approach the summer driving season, while gasoline inventories are down 0.9% compared to the same period in 2008," Headley explained. "Conversely, demand for diesel is down significantly due to lower freight volumes – that's keeping a lid on prices. Simultaneously, total stocks of both low-sulfur and ultra low sulfur diesel (ULSD) fuel are 27% higher now than they were a year earlier. That makes a big difference."

As a result, diesel prices are remaining relatively steady. New England and the Central Atlantic remain the highest regions, with the Central Atlantic gaining a penny to join New England, which was unchanged, at $2.40/gal. The Rocky Mountain region was also unchanged at $2.27/gal.

The East Coast and Lower Atlantic saw two cent gains to $2.28 and $2.21, respectively. The Midwest, at $2.17, Gulf Coast, $2.21, West Coast, at $2.34 and California, at $2.35, all increased one cent.

Executives of major trucking carriers attending the Wolfe Research Global Transportation Conference in New York City today indicated they expect diesel prices to remain steady for the remainder of the year.

"Diesel prices on a relative basis have crashed," Tom Kloza, chief oil analyst for the Oil Price Information Service (OPIS), told FleetOwner. "Refiners could count on diesel at the refinery gate fetching a gross profit above crude of about $20-$25 per barrel (bbl) in 2008. That spread is down to about $4 bbl."

Kloza added that diesel demand for tractor-trailers is probably downy 15% or so, and diesel demand for construction fleets, smaller trucks, and others is off likely by 15 to 25%.

"Those are extraordinary year-on-year drops," he said. "Simply put, the [fuel] that sees the greatest demand growth when the local or global economy grows is diesel. The corollary is that the [fuel] that sees the greatest demand destruction when local or global economic growth sags is diesel as well."

Executives of major trucking carriers attending the Wolfe Research Global Transportation Conference in New York City today indicated they expect diesel prices to remain steady at least until economic recovery takes hold.